Neutral Citation: 2017 ONFSCDRS 169

FSCO A14-005714

BETWEEN:

RAJWANTIE BHARAT

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Alan Mervin

Heard: March 30, 2016, at the offices of the Financial Services Commission of Ontario in Toronto.

Closing written submissions received: June 28, 2016 and July 1, 2016.

Appearances: Cecil Jaipaul for Ms. Bharat Arash Rowshanzamir for State Farm Mutual Automobile Insurance Company

The Applicant, Rajwantie Bharat, was injured in a motor vehicle accident on March 26, 2010. She applied for and received statutory accident benefits from State Farm Mutual Automobile Insurance Company ("State Farm"), payable under the Schedule.¹ State Farm terminated certain benefits. The parties were unable to resolve their disputes through mediation, and Ms. Bharat applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

Ms. Bharat's preliminary issue hearing was heard together with that of her husband, Mr. Bharat. Both were involved in the same accident, have the same representative, the same insurer, and the issues in dispute for both involve housekeeping and home maintenance benefits and medical benefits. I have dealt with Mr. Bharat's case in a separate decision. My reasons for my decision are explained at length in that decision.

The preliminary issues in this hearing are:

Is Ms. Bharat precluded from proceeding to arbitration because she failed to mediate the issues in dispute within two years of the Insurer's refusal to the amounts claimed?
Is Ms. Bharat precluded from proceeding to arbitration by operation of s. 55(2) of the Schedule because she failed to attend an Insurer Examination under section 44 of the Schedule?

Result:

Ms. Bharat's claim with respect to housekeeping and home maintenance is statute barred. Ms. Bharat is precluded from proceeding to arbitration with respect to this issue.
Ms. Bharat is not precluded from proceeding to arbitration by operation of s. 55(2) with respect to the medical benefits in issue because the Notices of Examination are not valid.

EVIDENCE AND ANALYSIS:

Is Ms. Bharat statute-barred from proceeding to arbitration?

The Insurer seeks an order precluding Ms. Bharat from proceeding to arbitration with respect to her Housekeeping and Home Maintenance claim. Because she did not mediate the issue within two years of the denial of the benefit, the Insurer submitted that Ms. Bharat is therefore statute barred from proceeding to arbitration on this issue.

Following the accident of March 26, 2010, Ms. Bharat filed an application for accident benefits on April 12, 2010, claiming entitlement to several benefits, including claims for Housekeeping and Home Maintenance, and payment for treatment in accordance with OCF 18 treatment plans subsequently submitted on her behalf.

She was examined by Dr. Risa Bordman, a physician, on April 16, 2010, and obtained an OCF 3 disability certificate endorsing her eligibility for Housekeeping and Home Maintenance benefits, because of accident- related soft tissue injuries which she claimed prevented her from performing pre-accident housekeeping tasks. According to the disability certificate, all of her injuries were expected to resolve within five to eight weeks.²

The Insurer notified her by letter dated July 27, 2011,³ that it required an Insurer Examination (IE) with respect to entitlement to the housekeeping claim, and had scheduled an in home IE with Occupational Therapist Kevin Cheng, for August 18. 2011 at 10:00 a.m. She did not attend this examination, and following her nonattendance, the Insurer informed Ms. Bharat by OCF 9 and letter dated August 22, 2011 that the benefit was terminated, and that she was no longer entitled to housekeeping and home maintenance benefits as of August 18, 2011 because she cancelled the IE.⁴

The examination was then rescheduled to Saturday, September 10, 2011 in order to accommodate a request by Ms. Bharat. She failed or refused to attend the rescheduled examination.

She then submitted an application to mediate the denial of housekeeping benefits, dated March 5, 2014, well beyond two years after the August, 2011 denial.

The Insurer now seeks an order that Ms. Bharat is statute barred from proceeding to arbitration on this issue as she has not mediated the denied benefit within two years of the denial, contrary to section 281.1 of the Insurance Act and section 51 of the SABS.

THE LAW

Limitation Period

Section 281.1 of the Insurance Act⁵ states as follows:

281.1(1) A mediation proceeding or evaluation under section 280 or 280.1 or a court proceeding or arbitration under section 281 shall be commenced within two years after the insurer's refusal to pay the benefit claimed. 2002, c. 24, Sched. B, s. 39 (6).

In the leading case of Smith v Co-operators General Insurance Company,⁶ the court found that the two-year limitation period under s. 281(5) of the Insurance Act only begins to run upon the issuance by the insurer of a valid refusal. The Court found that the insurer had an obligation to inform insureds of the entire dispute resolution process found in sections 279 to 283 of the Insurance Act in straightforward and clear language, directed towards an unsophisticated person.

The Court found that,

"At a minimum, this should include a description of the most important points of the process, such as the right to seek mediation, the right to arbitrate or litigate if mediation fails, that mediation must be attempted before resorting to arbitration or litigation and the relevant time limits that govern the entire process. Without this basic information, it cannot be said that a valid refusal has been given."

In Smith, The Court found that the refusal only informed the insured person of the first step of the process, and was therefore not a valid refusal, and, as a result, the limitation period under s. 281(5) of the Insurance Act did not begin to run.

Since Smith, therefore, it is well settled law that the refusal must be in clear and unequivocal language, directed towards an unsophisticated person, and also must contain an explanation of all the steps necessary to dispute the refusal. The onus is on the Insurer to ensure the refusal complies with these requirements, and if it is clear that the refusal does not comply with these basic requirements, the limitation period will not be triggered.

Is the denial of housekeeping and home maintenance benefits valid?

The Insurer has submitted that the August 22, 2011 termination letter with respect to this claim was clear and unequivocal, in straightforward language, and included an explanation of the dispute resolution process, thereby triggering the limitation period to apply for mediation. The denial notified Ms. Bharat that payment of that benefit would be stopped as of August 18, 2011. If the denial is found to be valid, a plain reading of the statute requires that the mediation would have to be commenced by August 22, 2013, in accordance with the requirements of section 281 of the Insurance Act.

In the current case, mediation was not commenced until March 5, 2014, well outside of the two year limitation period, and the Insurer submits that the denial is valid, triggering the limitation period. The Insurer submits the Applicant is therefore statute barred from proceeding to arbitration with respect to her housekeeping and home maintenance claim.

Ms. Bharat submits that the denial is invalid, and therefore, it did not act to trigger the limitation period, thereby allowing her to proceed to arbitration. She has argued that the wording of the denial of the benefit was unclear, and confusing.

In accordance with the principles in Smith, and as elaborated in Strauss, supra, a valid refusal of benefits must state a clear and unequivocal denial, provide the reasons therefore, including accompanying medical documentation if applicable, and provide a description of the dispute resolution process in straightforward and clear language, directed towards an unsophisticated person.

The OCF 9 letter dated August 22, 2011,⁷ sent to Ms. Bharat, upon which the Insurer relies, and which purports to terminate the housekeeping and home maintenance benefit, reads as follows:

Housekeeping and Home Maintenance Expenses: We have been informed that you cancelled the Insurers Examination on August 18, 2011 with Kevin Cheng. Therefore, you are no longer entitled to Housekeeping and Home Maintenance benefits as of August 18, 2011, pursuant to Section 37 (7) (b) of the Statutory Accident Benefits Schedule. The examination is in the process of being rescheduled as per your letter. To be entitled to future Housekeeping and Home Maintenance Benefits, the assessment must be completed. You may be entitled to benefits that were withheld if the assessment is completed and you provide a reasonable explanation for your noncompliance with Section 37 (7) (b).

The in home examination was then rescheduled for September 10, 2011 at 10:00 am, but she did not attend. According to OT Kevin Cheng, when he arrived at the home, he received no response to knocks on the door, or a phone call to Ms. Bharat.

The Applicant takes issue with this denial, particularly the portion which reads, "you are no longer entitled to Housekeeping and Home Maintenance Benefits", followed by "you may be entitled to benefits that are withheld", submitting that this is confusing and unclear as to why the Insurer requires Ms. Bharat to provide a reasonable explanation for her noncompliance, and argues that there is no provision in the Schedule for the Insurer to demand and rely on this statement to deny benefits because Ms. Bharat did not contact the Insurer within 10 days.

Ms. Bharat further submits that the OCF 9 is not a form approved by the Superintendent of Insurance, and relies on section 227 of the Insurance Act, and Section 66 of the Schedule in this regard.

In my view, there is nothing confusing with respect to the wording of this refusal. It is clear, straightforward and understandable. The explanation given as the reason for denial of her claim was Ms. Bharat's failure or refusal to attend an assessment. It also provided a detailed explanation of the steps involved in the dispute resolution process, should she wish to dispute the decision, and a warning that should she wish to dispute the Insurer's refusal to pay, she could do so by completing an application for mediation within two years of the refusal. She did not do so.

Further, whether or not this denial is strictly legal (with regard to the submissions regarding the Insurer's noncompliance with sections 44 and 37 of the Schedule) or correct in its requirement to respond within ten days is, in my view, inconsequential with respect to its validity, as, according to Strauss, supra, "the Court of Appeal has repeatedly said that, so long as the insurer provides a valid refusal, the limitation period should be strictly applied. It does not matter if the reason provided for the refusal of the benefit is incorrect or inaccurate at law," The Court cited the cases of Turner v. State Farm Mutual Automobile Insurance Company⁸ and Sietzma v. Economical Mutual Insurance Company⁹ in support of this finding.

Ms. Bharat further submitted that a suspension of benefits is different from a termination or refusal, and relies on Luther v Economical Mutual Insurance Company¹⁰ in support of this argument. She submits that a document that first advises that benefits are suspended, and then proceeds to advise that the said benefit is terminated is confusing, nor is it clear and unequivocal.

In Luther, the Applicant, upon attending for a defence medical pursuant to a notice given, refused to sign a consent form, and the examination did not take place. Arbitrator Wilson found that "the penalty set out in the Schedule for disobedience "is simply the suspension of benefits until such time as the person makes him or herself reasonably available for an examination".

While in the current case, it may be argued that there was only a right to suspend or withhold benefits until such time as the Applicant complies with the request for the IE, I find that there is nothing confusing or equivocal with respect to the explanation of benefits given. The reasons were set out clearly, and in straight forward language that an ordinary person could understand, and the options available to the claimant and the penalty for noncompliance were clearly set out. I am not bound by Luther. This issue was more recently dealt with in the case of Kanapathilillai v Personal Insurance Company of Canada.¹¹ In that case, while the suspension of benefits was for a different reason, ie noncompliance with required production of certain documents, as opposed to nonattendance at an IE, the Arbitrator held that a limitation period holds even in the face of a suspension of benefits. I prefer the reasoning in Kanapahilillai, and in my view, that principle also applies here.

With regard to the objection relating to the Insurer's use of the OCF 9 to convey the denial, the Insurer submits that this is the standard form used by the insurance industry to convey a decision regarding an insured's entitlement of benefits, and its use has been well accepted by courts and Arbitrators.

The 2012 decision of Arbitrator Alves, in Do and Guaranty Company of North America,¹² stated "the explanation of Benefit Form, the OCF 9, is the form insurers are required to use when benefits are refused"¹³, came well after the Superintendent's Bulletin of June 16, 2010, on which Ms. Bharat relies to challenge the use of the OCF 9. Further, the Insurer has submitted that in any event, Superintendents Bulletins are not binding.

While I am not bound by this decision, I agree with Arbitrator Alves and I am not prepared to find that the OCF 9 was not valid, nor is its use an unfair or deceptive act or practice as is submitted by Ms. Bharat. I am not bound by a Superintendents Bulletin, as these are meant to be used as guidelines and are not binding. The OCF 9 is still being commonly used throughout the insurance industry, and while the standard practice of the industry, on its own, does not make it legal, the OCF 9 has been accepted over the years by Arbitrators and Courts. I am not aware of any case that has turned on the legality of the use of the OCF 9 form itself.

For these reasons, I find that the refusal of benefits dated August 22, 2011 was clear and unequivocal, contained the necessary ingredients as outlined in Smith, and elaborated on in Strauss and many other subsequent decisions, and acted to trigger the limitation period. As Ms. Bharat did not apply for mediation within the two years following the refusal, I find she is precluded from proceeding to Arbitration on this issue.

Should the arbitration regarding treatment plans for medical benefits be stayed because of nonattendance at scheduled Insurer's Examinations?

The Insurer states that it seeks dismissal of the arbitration of the medical benefits because of Ms. Bharat's nonattendance at IEs. Alternatively, the Insurer seeks an order to stay the arbitration of the medical benefits until such time as she attends the IEs.

However, I note that in the joint factum of the Applicants, dated March 4, 2016, at paragraph 5 of the factum of Rajwantie Bharat, she states that she relies on a declaration contained at paragraph 3 in the Affidavit of Jonathan Tatner, a lawyer at the Insurer's firm, sworn February 19, 2016. That paragraph states as follows:

The accident benefits which are the subject matter of this hearing are medical/ rehabilitation benefits and housekeeping /home maintenance. However, the Respondent is only disputing that the Applicant's claim for housekeeping/home maintenance is statute barred as per section 281.1 (1) of the Insurance Act.

Because of this, I am not prepared to dismiss the claims at issue for medical benefits, but rather, only decide whether the arbitration should be stayed until Ms. Bharat complies with the request for IEs, should I find that she failed or refused to attend the IEs.

An OCF 18 dated January 9, 2012 for physical therapy was submitted to the Insurer. In a letter to the Applicant dated January 11, 2012, Ms. Bharat was notified that the Insurer would require an IE for this treatment plan. That letter advised that details of the assessment would be provided shortly.

In a follow up letter dated January 27, 2012, which was the actual notice of assessment for this IE, and in which Ms. Bharat was notified that the examination was scheduled to take place on February 6, 2012, the purpose of the IE was stated as follows: "The purpose of this examination is to determine if OCF 18 dated 01/09/12 is reasonable and necessary as there are gaps in treatment without documented clinical explanation."¹⁴ Ms. Bharat did not attend the examination, and the OCF 18 was denied by way of OCF 9 dated February 7, 2012 for failure or refusal to attend the February 6, 2012 assessment.

She then received a further notice dated February 9, 2012, advising that the examination was rescheduled to February 27, 2012. That notice also gave this reason for the examination: "the purpose of this examination is to determine OCF 18 02/06/12 is reasonable and medically necessary as gaps in treatment without documented clinical explanation"¹⁵.

She wrote the Insurer on February 17, 2012 advising that the time set for the examination was time was not convenient, and requested it be rescheduled. It was rescheduled to March 19, 2012, and Ms. Bharat failed or refused to attend that examination. No further notices were sent to her, but an OCF 9 dated March 21, 2012, denying two treatment plans, the plan dated 01/09/12, and a second treatment plan dated 02/06/12 (for which no separate notice was apparently) sent, was sent to Ms. Bharat for "failing or refusing to attend the Insurer's examination with the chiropractor ".

Failure to comply with 44(5) of the Schedule:

Before it can be said that an insured failed or refused to attend an IE, the failure or refusal must follow a valid Notice of Examination given to the insured. That Notice must comply with the requirements of s. 44 of the Schedule.

Under s. 44(1) of the Schedule, an insurer is entitled to an IE for the purpose of assisting it "to determine if an insured person is or continues to be entitled to a benefit under this Regulation for which an application is made, but not more often than is reasonably necessary . . . ."

Under s. 44(5), an insurer who requires an IE must give the insured person a notice that sets out, among other things, "the medical and other reasons for the examination."

State Farm's Notice of Examination to Ms. Bharat dated January 27, 2012 for an IE scheduled for February 6, 2012 indicated that "the purpose of this examination is to determine if OCF 18 dated 01/09/12 is reasonable and necessary as gaps in treatment without documented clinical explanation".(sic)

Similarly, the Notice of Examination to Ms. Bharat dated February 9, 2012 for an IE scheduled for February 27, 2012 indicated that "the purpose of this examination is to determine if OCF- 18 02/06/12 is reasonable and necessary as gaps in treatment without documented clinical explanation".(sic)

In my view, while these may constitute "other reasons, they are not medical reasons.

Ms. Bharat has submitted that State Farm has "never provided a medical or other reasons for the examinations scheduled".¹⁶

The Insurer submits that the notice is valid, and that the letter to Ms. Bharat dated January 11, 2012, should be read together with the Notice of Examination and other past correspondence.

The Insurer submits that these documents articulate the need and basis for the IE and the medical reason for the proposed IE. That letter sets out that the Applicant will be assessed for the following: "TENS manipulation multiple regions exercise multiple regions documentation support activity for claim form."

In Augustin and Unifund Assurance Company,¹⁷ Arbitrator Sapin stated the following with respect to the contents of an Insurer's Notice of Examination:

Given the serious consequences to an insured person of refusing to attend an IE for which proper notice has been given – barred from commencing a mediation proceeding to dispute an insurer's denial of medical treatment – the notice requirements set out in s. 44(5) should be strictly construed and the insurer's notice should be closely examined to ensure it complies. The requirements are mandatory. (emphasis mine). They are there to balance the naturally intrusive nature of an IE and to ensure fairness. The insured person is entitled to make an informed decision about whether they wish to pursue their claims and attend the IE, or not. The legislature has determined that, in fairness, an insured person is entitled to specific information, including medical reasons, about why they are being required to attend an IE.

The Schedule does not precisely define what constitutes a "medical reason". However, I am not satisfied that the reason given in the notices, "is reasonable and necessary as gaps in treatment without documented clinical explanation" constitute medical reasons. That statement, in my view, is a statement of fact, and may constitute "other reasons". However, I am not satisfied that it is a medical reason. Section 44 requires both medical and other reasons in order for the notice to be valid.

I agree with Arbitrator Sapin's analysis in Augustin with respect to the notice requirements. They must be strictly construed with respect to the contents of the notice. In order to be a valid notice, those requirements are mandatory and must be contained within the notice given to the Insured.

Section 44(5) makes it clear as to what is to be contained in the notice. Whether past correspondence contains information that may constitute medical or other reasons, in my view, does not negate the requirements of s44 for compliance. Both the medical and other reasons must be contained within the notice itself. Reasons that may have been given in earlier correspondence do not satisfy this requirement.

For these reasons, I find State Farm did not comply with s. 44(5) because it did not include medical reasons in the notices. The notices given are therefore not valid, and, having made that finding, I find that s. 55.2 does not apply. I am therefore not prepared to stay the proceedings on the basis of the Applicant's nonattendance at the IE's.

Other Issues

The parties raised several other issues in their respective oral argument and written submissions. However, my findings regarding the limitation issue with respect to the housekeeping claim, as well as my findings with respect to the alleged nonattendance at the medical benefit IE's are determinative of the issues in this preliminary issue hearing. While I have considered the other arguments raised, having made those findings, under the circumstances and in light of my findings on the above issues, I find the other issues raised by either party in their submissions to be moot.

EXPENSES:

I leave the issue of expenses of this preliminary issue hearing to the hearing arbitrator

June 15, 2017

Alan Mervin Arbitrator

Date

Financial Services Commission of Ontario